How to Really Make Money Online: A Guide for Beginners
Let me tell you something that I honestly believe: anyone can make money online.
Some people can create a lucrative side hustle, some people can replace their 9–5 job, and a lucky few will be able to become rich beyond their wildest dreams.
Do you think I’m making it sound too easy? It may be true that making money online is very achievable, but it is not at all easy. It will require leaving your zones of comfort and competence and putting yourself out there into the world. This kind of emotional labor is very difficult.
Here’s the thing though: I’m not sure if you realize how lucky you are. You are one of the luckiest people who has ever lived. I don’t necessarily mean that you have actually experienced a lot of good fortune in your life, because some of you have been decidedly unlucky. I also don’t mean that you are lucky to be born in the most prosperous time in human history, because some of you might still be struggling to get by.
What I mean is that you should consider yourself one of the luckiest people who has ever lived because of the opportunity that is still in front of you.
As amazing as we all recognize the internet to be, I think we still consistently underestimate it. Have you ever fully realize what the implications of the internet are? Consider the following points:
The overhead of starting a business has almost entirely disappeared. It used to be that if you wanted to start a business you would need a physical premises, which would be very expensive. If you wanted to have the business run while you weren’t there, you had to hire someone to operate the cash register, which would also be very expensive. Now for what it costs to host a website (not much), you can have an automated checkout in operation 24/7.
The internet has connected the world. You already knew that, but have you ever thought through what that means for you? It used to be that your pool of potential customers were the people who lived nearby. If you wanted to sell something specialized, you had to hope that there were enough people with that unique interest nearby to keep you in business. Now there just needs to be enough people with that particular interest in the entire world. It’s a whole new ballgame.
If you don’t see the opportunity yet and are sitting here thinking none of this applies to you because you have nothing to sell, stick with me. If nothing else the rest of this article will challenge your way of thinking –and it might even convince you to get started.
In this article I want to lay out the principles behind making money in general, and making money online in particular. Then I want to delve a level deeper and talk about the best strategy to pursue when trying to make money online, then we’ll dig deeper one final time and talk about the specific tactics to use to start making money, and finally I want to leave you with some advice that I hope is helpful.
The High-Level Concepts:
To start, let me ask you a question: how many ways are there to make money?
Go ahead, think about it a second, I’ll wait.
I actually think there are two really good answers to that question. The first answer is infinite. There are infinite ways to make money. Most of them haven’t even been thought up yet. Fifty years ago no one would have ever dreamed of starting Uber, and we probably can’t even imagine some of the income earning strategies that are going to emerge over the next fifty years.
The second answer might be even better: one. There is only one way to make money.
Can you think of what it is?
While you think about it I’ll throw out the caveat that there are lots of other ways to get money besides making it. For instance, you could steal it. I don’t recommend that strategy, mostly because stealing is illegal, immoral, and not a reliable way to make a living. In fact, the problem of being unreliable applies most of the ways of “getting” money besides earning it: winning the lotto, receiving an inheritance from a distant relative that you didn’t know you had, etc.
If you want to make money, you need to rely on the one method that is available to us. Have you thought of what it is yet?
The one way to make money is: Selling
Most of the time when I ask people what the one way to make money is, their answer is “work.” While, it’s true that hard work is very highly correlated with making money, it’s not an essential component. There are plenty of people who are making money while they aren’t working, but no one is making money where they aren’t selling.
It doesn’t matter what you sell: you could sell a product, a service, an asset, heck, you can sell someone else’s product, service or asset. You just have to sell something.
We live in a transaction based economy and the way to make money off a transaction is to sell something.
“Hang on a second,” you might be thinking, “I don’t sell anything and I make money. I’m an employee at a big company.” I have two responses to that:
- You may not think you’re selling anything, but I bet your company is. So, either directly or indirectly, you are supporting the sales of your organization.
- Whether or not your company is selling something to others, you are selling something to your company; and it happens to be your most valuable resource: time. Think about this for a second, how do you get paid? What is the metric you get paid by? The vast majority of people out there get paid either by the year (we call that a salary), or by the hour (which we call a wage).
That second point means that working for an employer involves the decision to sell time for money, to trade hours for dollars.
The big problem with the strategy of selling hours for dollars is the fact that time is the most valuable resource that you have. Time is a scarce, non-renewable resource. Once an hour is gone, it’s gone for good. You can’t do anything to change the fact that there are only 24 hours in a day.
Selling your time is a bad approach. A better approach would be to invest your time into creating something that you can sell instead of time.
This is the concept of passive income (sometimes referred to as “residual income”). Passive income happens when you put the time and effort into a project up front, and continue to get paid even when you aren’t working on it.
With passive income, you don’t get paid based on the time you put in, you get paid based on the usefulness of the output.
Let’s take a moment to look at two examples of passive income that existed in the pre-internet days:
- First, let’s think about an album (depending on your age, you can imagine a CD, a cassette tape, an 8 track, a vinyl record, or whatever form you associate with purchasing music). The concept here is that you would put in the work once to write and record all the songs. The amount of money that you can make is not going to be dependent on how much time it took you to create the album, it’s going to depend on how well the album sells. You invested your unpaid hours into creating something that could be sold instead of your time.
- Next, let’s think about the example of a book: Stephen King is still making money off of The Shining, and he hasn’t done any work on it in decades.
As a quick recap before we move on, we’ve seen two things at a high level:
- The only way to make money online is to sell something. This means that as we start to dive into the strategy and tactics of making money online we need to understand that in order to make any money online we need to figure out how to sell something. Fortunately there are lots of ways to do that.
- Instead of trading time for money, we want to invest time in creating something that we can sell instead of our time so that we can continue to get paid even after we have stopped working.
Now we are getting a level deeper and more specific. When I say strategy, I mean the overall framework or foundation that you are going to put in place to make all the different monetization tactics that we talk about later possible.
In one sentence, here’s the basic strategy: You’re going to build and audience of true fans and provide value to them.
Now, that sentence might be a little vague on it’s own so let’s take a second to unpack it.
Let’s start with the term “audience.” In order to build an audience you’re going to need a platform. If you communicate best through the written word, this could be blogging, if you’re great at oral communication it could be podcasting, and if you have a love for movement and action, video is probably your go-to medium and something like YouTube might be your platform. Let’s not forget about social media. Social media accounts can enhance the reach of your platform, but they can also act as their own platform. For instance, you can actually blog and do videos within Facebook. Social media also contains another important medium of communication: pictures. Apps like Instagram and Pinterest prove that there’s still plenty of appeal in the static visual image.
The idea with any of these platforms is that you want to build a recurring audience of people who subscribe to your content. On YouTube they’re actually called subscribers, on Twitter they are called followers, and on Facebook they are your fans. For a blog there’s no official term but subscriber is the one that’s usually used since you the idea is to get people to subscribe to get email updates from you.
The best way to build an audience is to provide value. You create something that some people –not everyone– but a certain group of people will find useful.
The best way to be useful to someone is to solve a problem for them.
Don’t get too narrow when thinking about the word “problem;” In this context it’s actually a pretty broad term. When someone is watching humorous videos on Facebook or YouTube, they are trying to solve an entertainment problem they have. They had wanted something new, interesting and funny to keep them occupied, and the video solved their problem.
In building an audience you don’t just want breadth, but depth. In other words, you don’t just want a high number of total subscribers, you want to convert a subset of those subscribers into true fans.
By “true fans,” I mean people that love what you are doing. They love your content, they love your personality, and they would miss you if you were gone.
These true fans are the people who are likely to tell their friends and co-workers about you. They are the people who are likely to share your content on social media. They are the ones who are likely to buy your product if you ever have something to sell them.
So what you need to do is pick an arena where you feel like you have something to offer and to start creating free content that will cause people to want to follow you and will turn your followers into true fans.
As you consistently show up, deliver value, solve problems, and provide free content, you’re going to build up a tremendously valuable asset: Trust.
Trust is so important because people tend to do business with people they know, like, and trust. When you put yourself out there online and provide value, people will start to feel like they know you, they will come to like you, and, over time, they will begin to trust you.
This might be the most venerable of online monetization strategies. It’s the OG, the original gangsta.
Specifically, what you are doing with advertising is selling your audience’s attention.
In other words, There is a third party out there –the advertiser– who wants to get your audiences attention so that they can try to sell them something. You are basically selling this advertiser the right to get their message in front of your audience.
At a more advanced level, advertising is going to be most lucrative when you are established enough to reach out to brands that would be interested in targeting your audience in particular and negotiating with them directly. But that probably seems pretty intimidating to get started so at the beginning you might want to look for an easier path.
The easiest way to get started is to join an ad network which will find advertisers for you. The biggest and most popular of these is called Google Adsense, and it works for both blogs and YouTube channels.
Here’s the way it works: you sign up and Google finds advertisers for you. On your blog, you pick the size of ad you want (if you want you can pick a “responsive” size that makes itself big enough to fill up the space it’s in), and they give you some html code to copy and paste into the back end of your website.
For YouTube you can either change your settings so that each video you upload is monetized with ads, or you just click the button on each upload saying you want to monetize it.
That’s all you do. Google finds advertisers for you to fill up the ad space.
In exchange, Google charges the steep fee of half of the income that the ad generates. There’s no doubt that this is a big price to pay, but unless you’re willing to find your own advertisers, this is a good deal.
Before we move on, a disclaimer about ads:
First of all excessive ads can make a blog look unprofessional at best and like some sort of a scam at worst. Don’t overdo it. If you stick with just AdSense you should be okay since they limit the number of ad units you can put on a post, but some professional bloggers have chosen to forgo ads altogether.
In my personal experience, ads on YouTube are better than ads on a blog. My theory is that people have come to expect ads on YouTube, but find them distracting on a blog.
2) Affiliate Marketing
Simply put, Affiliate Marketing is the process of selling someone else’s product or service for them.
In a lot of ways, Affiliate Marketing is very similar to advertising and sometimes they get close enough to each other that the line between them gets a little blurry, but in general there are some crucial differences between the two.
The first big difference is that the message that’s being relayed to your audience –the sales pitch that they are being given– comes from you, the Affiliate Marketer, not the one whose product is being promoted.
But the biggest difference between the two is the terms of payment. With advertising your usually getting paid at a rate per every thousand people that see the ad, or maybe for every click, or possibly for some other action. With Affiliate Marketing you only get paid when the person selling the product closes the sale. You’re working on commission.
With Affiliate Marketing the most lucrative deals usually come from other online entrepreneurs wanting you to promote their product to your audience. Sometimes these deals can have commission rates of 30%, 40%, even 50% and up.
However, like with advertising, sometimes the easiest way to get started is to join a larger program. The most popular of these is Amazon Associates.
The way Amazon Associates works is that you can generate a custom URL link to any product or page on Amazon. If someone clicks on your link and buys anything (even if they don’t buy what you linked to) within the next 24 hours, you get commission on the sale.
The commission rates you get vary depending on what the person buys. You can find the full list of rates for various product categories here.
One of the reasons why it’s so great to start with Amazon is because it’s the easiest place to find lots of things to promote. They probably hundreds, if not thousands of items that they sell that would be of interest to your audience.
Another advantage is that you essentially get commission just for driving traffic to Amazon. Someone could click on an Amazon Affiliate link that you shared just because they were curious, then end up buying a hundred dollars of unrelated stuff that Amazon tried to sell them. You would get commission on all of it.
From my own experience, affiliate marketing works best in two situations:
The first is where you have built up a lot of trust with your audience, so when you say “hey, you guys need to check out this awesome product,” they trust you enough that some of them buy it.
The second is when you can get your message in front of someone who is about to make a purchasing decision and help give them the confidence necessary to pull the trigger.
As an example, let’s pretend that your blog or YouTube channel is in the photography space and that you know that some of the people that come across it haven’t started their photography hobby because they are scared of investing of the wrong camera. If you create a video listing the best options for beginners and tell them which one you honestly recommend, you can probably help a lot of those people feel ready to buy a camera and they will gladly use your affiliate link.
This is how online business should work. Everyone wins in this situation. The customer wins because they overcame the anxiety that was holding them back from a hobby they wanted to start, the camera company wins because they sold a camera, Amazon (or whatever affiliate program you sold it through) wins because they made a sale, and you win because you get a commission. Win-win-win-win.
3) Selling Your Own Products and Services
While advertising and affiliate marketing are great because you can get started with them right off the bat, they share the same major disadvantage: someone else is capitalizing on the lion’s share of your audience’s willingness to pay.
In a certain sense, this is bad for both you and your audience. It’s obviously bad for you because you want to maximize your profits, but it’s also bad for your audience since they would gladly be willing to pay you if you had a worthwhile product to offer them.
Just like there’s an infinite number of ways to make money, there’s an infinite amount of possible products and services that you could sell. For our purposes, we are just going to focus on the most profitable: digital products.
Digital products have a number of advantages over physical products: there’s no inventory to manage, there’s no cost associated with shipping and delivery, and there’s often very little cost associated with producing the product in the first place.
What are some examples of digital products? Well, if you’re amuscician, the most obvious thing would be to make an album and sell it on iTunes. If you make funny videos, you could make a short film that people need to pay to download. Some favorites among online entrepreneurs over the years have been e-books and online courses.
If you decide to create an online course but don’t have a website or are unsure of how to set up a system for payments and returns, you could get started with a site like Udemy which will host your online course in exchange for a portion of the profit.
I truly believe that everyone who makes money online should aspire to eventually have something that they can sell to their audience. Your audience wants what you have to offer. You owe it to them to produce something for them that is worth their time and money.
With donations, you are selling your mission. People who donate voluntarily hand over their money because they believe in what you are doing and want you to be able to keep doing it.
By far the easiest way that I’ve found to receive donations online is through the website Patreon.
Patreon allows you to set up a profile like you would on a social media site and to offer rewards to patrons who sign up for a certain level of monthly giving. Patreon takes a small percentage of your donations every month as their administration fee, and the rest gets direct deposited into your bank account once a month.
One nice thing about Patreon is that it can become an income stream that is much more predictable that all of the other methods that exist for making money online.
With freelancing you find work online and get paid by the job. So for instance, a company might pay you to write an article for their website. You do the work once, and you get paid once.
If you can find freelancing gigs, they can give you a real boost, especially early on when other methods of monetization are still getting ramped up. Plus, one freelancing gig can lead to other freelancing gigs and some of them can be quite lucrative.
While I do view freelancing as an improvement over the normal pattern of trading hours for dollars, it’s still not ideal for me. It lacks the component of recurring payment which is critical to building passive income.
6) Sell Your Online Business
When you create a business, you are essentially creating an asset. You have been building trust with an audience as well as an income stream, both of which are things that other people might be interested in acquiring.
I will mention that it’s easier to sell your business if the brand doesn’t completely revolve around you. The more you stay behind the scenes, the easier it is to transfer the business over to new ownership.
If over time you are able to accumulate a team of content creators to contribute, you might be able to slowly phase yourself out and be in a position to comfortably sell the business and walk away.
If you haven’t yet gotten started in the world of online entrepreneurship, I highly recommend that you get started today.
Tomorrow is just the first step to never.
A good next step would be to sign up to my mailing list below, and I will send you a free PDF with the five most important pieces of advice I have for getting started.
You can do it. It will take time. It will be difficult. It will be worth it.
Trust me. One year from now you’ll wish you started today.